Here’s something that may challenge your current thinking about incentives. Not all incentive program motivate better and higher levels of performance. In fact, a good many of them have just the opposite effect; or, they serve as a source of motivation for the wrong people; or, they become a source of entitlement.

Basically, there are three types of motivation: Fear (self-imposed or direct threats); Extrinsic (outside programs such as bonuses, special perks, etc.); and Intrinsic (internal drive for accomplishment). Two of them, fear and extrinsic, generally have short-lived impact, even though they may have some immediate impact on performance levels.

The challenge with fear motivation is that people either get used to it; or, they get away from it. Threatening people with loss of a job, demotion, reduced salary can produce a temporary change that makes it look like people finally “got it”. More often, it produces a prolonged period of “malicious compliance” during which you actually begin to get less and less of what you wanted before any threats were ever made.

A second challenge associated with fear is that people get away from it – they leave the organization. “Good,” you say. “If you don’t want to be here then I don’t want you either. So leave and stop ruining it for the rest of us.” While some would certainly consider that an appropriate response, most effective leaders would view that as the mark of immature and insecure leader. And, so do most of those who stay. If you recognize yourself in that scenario, you might want to consider changing your approach and moving on up to trying extrinsic or intrinsic motivation.

Extrinsic motivation can actually work pretty well when people work in jobs that don’t require a great deal of personal engagement or commitment. That would include some forms of retail sales, some service occupations, some manufacturing, administrative bureaucracy, and the like. The major challenge with Extrinsic motivation is that it can quickly become an entitlement; and once it does, it suffers a serious loss of value, often becoming more a dissatisfier than a motivator.

The most common “problem” associated with extrinsic motivation is that the payoff is usually designed by someone who believes that all people are motivated by the same things. So, the person designing the system bases the entire model on what (s)he likes and seldom considers even the remote possibility that others might be motivated differently.

Another problem is that sometimes the payoff is larger than the owner/designer anticipated. When that happens, a new and less lucrative plan is quickly introduced. The stick gets longer, the string shorter, and carrot less plump. The incentive model doesn’t work as well as previously until there is enough turnover among the participants that very few are left to talk about how good the old system was.

The most effective form of incentive is Intrinsic. It comes from the inside out; and in the next installment of this series, I’ll show you to lead people where you want them to go. In the meantime, if you’re relying on fear motivation, shift to extrinsic. If you’re relying on extrinsic for everyone, get ready to see something you may never have dreamed possible.